Correlation Between GM and Varun Beverages
Can any of the company-specific risk be diversified away by investing in both GM and Varun Beverages at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and Varun Beverages into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Varun Beverages Limited, you can compare the effects of market volatilities on GM and Varun Beverages and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of Varun Beverages. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Varun Beverages.
Diversification Opportunities for GM and Varun Beverages
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Varun is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Varun Beverages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varun Beverages and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with Varun Beverages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varun Beverages has no effect on the direction of GM i.e., GM and Varun Beverages go up and down completely randomly.
Pair Corralation between GM and Varun Beverages
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.96 times more return on investment than Varun Beverages. However, General Motors is 1.04 times less risky than Varun Beverages. It trades about 0.32 of its potential returns per unit of risk. Varun Beverages Limited is currently generating about 0.0 per unit of risk. If you would invest 5,273 in General Motors on August 27, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. Varun Beverages Limited
Performance |
| Timeline |
| General Motors |
| Varun Beverages |
GM and Varun Beverages Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Varun Beverages
The main advantage of trading using opposite GM and Varun Beverages positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Varun Beverages can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Varun Beverages will offset losses from the drop in Varun Beverages' long position.The idea behind General Motors and Varun Beverages Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Varun Beverages vs. MRF Limited | Varun Beverages vs. JSW Holdings Limited | Varun Beverages vs. Maharashtra Scooters Limited | Varun Beverages vs. Nalwa Sons Investments |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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